Hospital CFOs: 3 Undervalued Revenue Cycle KPIs You Should Be Measuring

As a hospital CFO, monitoring and auditing your revenue cycle performance, productivity, and compliance is an essential revenue integrity function for which you are responsible. My Team and I audit revenue cycle processes in hospitals across the country and find an alarming prevalence of healthcare organizations not sufficiently managing their claims processing steps.

The Value of KPIs. The most effective method to evaluate your revenue cycle team’s performance and productivity is to use Key Performance Indicators (KPIs). Elizabeth Goar interviewed Kamron Lachney, the Vice President of hospital operations for Change Healthcare in a 2018 article. Lachney lists one of the most common mistakes a CFO can make is to fail to monitor KPIs daily.

Reporting isn’t enough. It isn’t enough for you or your team to monitor and report a KPI during a meeting. You must compare your organization’s performance to industry standards. As Jacqueline LaPoint correctly identified in her article, “[r]ather than just gathering and reporting data for measures, KPIs start with a historical performance benchmark and hospitals continue to gather and report data to compare their performance against the benchmark.” From this comparison, you and your team can identify problems, investigate root causes, and begin process improvement.

Here are 3 Undervalued KPIs You Should Be Measuring:

  1. Days in Total Discharged Not Final Billed (DNFB) – DNFB is a trending indicator of claim generation and can identify performance issues affecting cash flow. Calculate the indicator by dividing the gross amount in discharged not final billed by the average daily gross patient service revenue. The industry benchmark is 4 to 6 days.
  2. Denial Resolution Rate – Denial Resolution Rate is a trending indicator of the effectiveness of your entire revenue cycle team to resolve denials successfully. Determine your rate by dividing the number of claims paid for a given period by the total number of claims submitted in the same period. The benchmark is 95% or higher.
  3. Credit Balance as a Percentage of AR – Credit Balance as a Percentage of AR is a trending indicator for ensuring compliance with regulatory requirements. It can also be an indicator of payment posting errors. Calculate the indicator by dividing the total credit balance in dollars by the average daily net patient service revenue. The industry benchmark is 5% or less.

Don’t allow a failure to measure, monitor, and act on these 3 KPIs to result in lost income for your hospital.

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